Nitto Denko : Quarterly Financial Summary

Date: July 26, 2023

Summary of Consolidated Financial Statements

for the First Quarter Ended June 30, 2023 (IFRS Basis)

(2) Financial position

2. Dividends

(Note) Revision of dividend forecast in the current quarter: No

3. Forecast for fiscal year ending March 31, 2024 (April 1, 2023 through March 31, 2024)

(% of change from same period in the previous year)

• These quarterly financial results are not subject to quarterly review procedures by Certified Public Accountants or audit firm.
• Explanations for adequate utilization of the forecast and other special matters

The forward-looking statements shown in this report, including the forecast, are prepared based on information available to the Company and on certain assumptions deemed reasonable as of the issuing date of the report. Consequently, the statements herein do not constitute promises regarding actual results by the Company. Actual results may differ materially from forecasted figures due to various unknown factors. For conditions regarding this forecast and precaution for use, please refer to "1. Qualitative Information Regarding Quarterly Settlement of Accounts (3) Explanation of forecasts and other projections" on page 6 of the Attachment to this summary of consolidated financial results.

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1. Qualitative Information Regarding Quarterly Settlement of Accounts

1. Explanation of operating results

During the first quarter of the fiscal year ending March 31, 2024 (April 1, 2023 through June 30, 2023), the economic environment saw a continued monetary tightening in Europe and the United States as inflation rates remained high. In the United States, some effects of interest rate hike were seen, such as easing labor supply and demand, but uncertainty about the economic outlook has increased, as the Federal Reserve Board (FRB) indicated that it will raise interest rate twice within the year. In China, demand for services recovered after ending of the Zero-COVID policy, but the pace of economic recovery was lower than expected, mainly due to sluggish demand for durable consumer goods such as automobiles and smartphones and a weak real estate market. Meanwhile, in Japan, companies made progress in passing on prices supported by wage base increases and other factors. In addition, the impact of the shortage of semiconductors eased, and business confidence improved in the domestic manufacturing industry, particularly in automotive manufacturers. In the foreign exchange market, the yen further depreciated against the U.S. dollar on expectations of a further widening of the interest rate differential between Japan and the United States.

In the key markets of Nitto Group (the "Group") in these circumstances, demand for optical films for automotive and virtual reality (VR), on which the Group is focusing on as its next growth point, increased. Demand for automotive materials increased along with the recovery in automotive production. On the other hand, demand for products for data centers and products used in manufacturing of semiconductors and electronic equipment declined due to deteriorating market conditions. In addition, new orders for immunologic adjuvants for COVID-19 vaccines have been suspended since the second quarter of the previous fiscal year.

The yen's exchange rate against the U.S. dollar for the first quarter ended June 30, 2023 was 135.1 yen to the dollar, a 7.2% depreciation of the yen compared with the same period of the previous year, and the effect of the weaker yen increased operating income by 4.5 billion yen.

As a result of the above, revenue decreased by 3.7% from the same period of the previous year (changes hereafter are given in comparison with the same period of the previous year) to 208,455 million yen. Operating income decreased by 41.8% to 22,411 million yen, income before income taxes decreased by 42.7% to 22,176 million yen, net income decreased by 42.6% to 15,191 million yen, and net income attributable to owners of the parent company decreased by 42.6% to 15,168 million yen.

Summary of results by segment

• Industrial Tape

For Functional Base Products, revenue did not reach the level of the same period of the previous year. Revenue of materials for assembly of high-end smartphones decreased as the resolution to secure materials in preparation for supply chain disruptions seen in the same period of the previous year came to an end. In addition, manufacture of semiconductor memories and ceramic capacitors remained sluggish, and demand for the materials used in manufacturing processes of such products decreased. In automotive materials, excluding the impact of the transfer of the NVH (Noise, Vibration, Harshness) business in the first quarter, demand for automotive materials increased as automotive production recovered mainly in Japan as the semiconductor shortage was resolved.

As a result of the above, revenue decreased by 0.9% to 80,693 million yen and operating income decreased by 10.5% to 7,457 million yen

• Optronics

In Information Fine Materials, revenue increased from the same period of the previous year. Demand for products for automotive displays, which are in a period of growth, remained strong, and new production lines for products for VR displays started operation. In addition, for high-end smartphones, the Group provided total solutions that combine optical films with OCA and process protective films, which contributed to revenue growth.

In Circuit Materials, revenue did not reach the level of the same period of the previous year. In CIS (Circuit Integrated Suspension), demand for hard disk drives (HDDs) with high capacities in data centers decreased, and the Group reduced costs by adjusting operations and other measures. The number of models adopting the high-precision circuits for high-end smartphones has increased from the same period of the previous year.

As a result of the above, revenue decreased by 6.3% to 104,363 million yen and operating income decreased by 20.3% to 20,032 million yen.

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• Human Life

In Life Science, revenue did not reach the level of the same period of the previous year. In the oligonucleotide contract manufacturing business, demand for immunologic adjuvants for vaccine declined due to the end of COVID-19. On the other hand, in the nucleic acid drugs market, commercialization for large-scale diseases is expected, and a new plant has been completed at a production site, Massachusetts, in the United States, to meet the growing demand in the future. An opening ceremony was held at the new plant. In development of nucleic acid drug discovery, the Group continues to promote clinical trials to out-license its pipelines. In medical products, demand decreased for surgical tapes and transdermal patches due to weak market conditions.

In Membrane (high-polymer separation membrane), revenue increased from the same period of the previous year. Demand of Membrane for ultra-pure water refining used in semiconductor production remained strong.

In Personal Care Materials, revenue increased from the same period of the previous year due to the acquisition of Mondi plc's personal care business in June 2022. In addition to the mainstay products for diapers, the Group is advancing the development of new applications that leverage the characteristics of functional films, which are the core materials. At the same time, the Group is working to develop new products contributing to the environment using biodegradable technologies.

As a result of the above, revenue increased by 4.6% to 29,278 million yen and operating loss amounted to 2,937 million yen. (operating income of 5,043 million yen was reported in the same period of the previous year)

• Others

Please note that this segment includes new products that have not generated sufficient revenue yet. Major business theme is the disposable Holter ECG device, and the Group is conducting pilot sales for full-scale mass production.

As a result of the above, revenue increased by 87.0% to 3 million yen and operating loss amounted to 1,284 million yen. (operating loss of 868 million yen was reported in the same period of the previous year)

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